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Harry Cassin
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Legg Mason reserves $67 million for FCPA settlement

Fund manager Legg Mason, Inc. said Wednesday it expects a settlement soon of a Foreign Corrupt Practices Act investigation into a unit that managed money for the Libyan government.

The investigation concerns Permal Group’s Libya deals from 2005 to 2007.

Legg Mason bought London-based Permal, a hedge fund manager, in 2005.

To pay for the FCPA settlement, Legg Mason said it accrued $67 million. That amount includes $31 million that Permal earned from the Libya business.

Baltimore-based Legg Mason said in a securities filing it expects to “shortly complete negotiations” with the DOJ and SEC.

Legg Mason combined Permal with another asset management unit in 2016 and changed the name to EntrustPermal.

The Libya investments in question were all terminated by 2012, Legg Mason said.

“The matter does not relate to any of our or our affiliates’ current business activities or client relationships and has focused on the actions of former employees of Permal who left that firm four or more years ago,” Legg Mason said.

Muammar Gaddafi ran Libya from 1969 until 2011, when he was killed by Libyan rebels.

In 2016, another fund manager, Och-Ziff, settled allegations that during the Qaddafi regime it bribed officials at the Libyan Investment Authority or LIA, Libya’s sovereign wealth fund. In return, LIA made a $300 million investment in Och-Ziff managed funds.

Och-Ziff paid $412 million to settle the FCPA offenses in Libya and several other African countries.

In November 2017, Paris-based Société Générale said it was under investigation in France and the United States for possible bribery offenses related to the Libyan Investment Authority.

Earlier in 2017, SocGen paid about $1.1 billion to settle a civil lawsuit that the LIA filed in London.

The suit alleged SocGen paid $58.5 million to a Panama-registered company controlled by associates of Gaddafi while he still headed the Libya regime.

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Here’s an FCPA disclosure from Legg Mason, Inc.’s Form 10-K filed with the SEC on May 30, 2018 (courtesy of FCPA Tracker):

We expect that we will shortly complete negotiations with both the U.S. Department of Justice (“DOJ”) and the SEC staff to resolve a Foreign Corrupt Practices Act investigation concerning the activities of our former Permal business in connection with managing assets of Libyan governmental entities in structures established by a third-party financial institution. Those investments were made in calendar years 2005 to 2007 and all were terminated no later than 2012. The matter does not relate to any of our or our affiliates’ current business activities or client relationships and has focused on the actions of former employees of Permal who left that firm four or more years ago. Based on discussions to date, we believe that any resolution of this matter will not result in restrictions on our or our affiliates’ ongoing business activities. We have accrued a $67 million charge to earnings for this matter in the year ended March 31, 2018, representing our current estimated liability for the settlement of the matter. This accrual reflects in part the net revenues of approximately $31 million earned by our former Permal business from managing assets of Libyan governmental entities. Any such resolution, including the actual amount of the payments required to ultimately settle this matter, which are uncertain and may be higher than the amounts we have currently accrued, are subject to the final review and approval of the DOJ, the SEC Commissioners and our Board of Directors.


Richard L. Cassin is the publisher and editor of the FCPA Blog.

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